The recent wave of digital nomads and minimalism has led many to question the benefits of owning a home. After all, buying a home ties you down to the house’s location and keeps you in mortgage debt for decades. But renting allows you to live anywhere in the world so long as you have the fund to pay the required rent. You also don’t have thousands of your cash tied up in a home.
While these are valid arguments, ultimately owning a home is a very profitable investment. Read on for 7 key benefits of buying a home versus renting.
The first benefit of owning a home is the increase in your overall financial worth through home equity. Home equity refers to how much of the house you own. For instance, if you pay a 20% down payment on the home you would own 20% of the home.
But let’s say the market value of the home increases or you pay more of the debt down through your monthly payments. In this case, your home equity would increase. Over the last century, home prices have consistently increased.
When you buy a home now you can expect its value and your home equity to increase in the next few years. Home equity is an actual asset that financial institutions allow you to borrow money against. You can take out home equity loans to cover high-interest consumer debts or for other pressing needs.
Owning a home gives you the financial and emotional security that no matter what happens you have a roof over your head. When you rent a home, there is often the fear of becoming homeless if you lose your source of income. Having your own nest gives your family a sense of security that they always have a place called home.
You also can’t relax and put down roots in a rented home. The landlord could cancel your lease any time they want their house back. But when you own your home you don’t have to worry about renewing the lease each year. There isn’t a possibility that the rent may increase or the terms of the lease change.
As a homeowner, you can establish yourself in the community where your house is. Your children can settle at the local school and not worry about being transferred every time your rental leases expire.
Another one of the key benefits of owning a home is that you are in control of all the maintenance and renovations. Homeowners don’t have to get landlord permission for renovations and home upgrades. If you rent a home, you are at the mercy of the landlord’s house rules.
Landlords may not allow you to make any alterations to the structure or appearance of the home. The landlord may also have rules about pet ownership, smoking, and noise levels that will disrupt your preferred lifestyle.
If something breaks or you have issues with utility companies, you must notify the landlord of the problem and wait for them to fix it. The landlord may not act fast enough for your preference. Some landlords are also annoying as they arrange home inspections and viewings that may disrupt your daily life.
There are many tax benefits of buying a home. Mortgage interest payments are tax-deductible whereas rent payments are not. So, if two people earn the same amount and one pays rent whereas the other pays a mortgage, the renter will pay more taxes in a year than the homeowner.
Additionally, if you live in a home for two of the last 5 years you don’t have to pay capital gains tax on the first $250,000 profit that you make upon selling the house. If you are a couple, then this threshold increases to $500,000. There are also tax benefits of being a first-time home buyer as you are exempt from some state and local real estate taxes.
Renting a home doesn’t earn you any investment income whereas buying a home is one of the best ways to invest your monthly income. When you rent a home you often must pay a 2 or 3-month deposit. This amounts to investment capital tied up in your landlord’s account, on which he or she pays zero interest.
Additionally, the money you pay in rent each month doesn’t go beyond giving you a roof over your head for the time of the being. On the other hand, your mortgage payments go towards home equity so your asset base increases. Every month that you make a payment your home equity increases.
Owning your home gives your children a head start on achieving financial independence since they can inherit the home from you once you pass on. This prevents them from having to buy their own home. They can use their money to buy even more homes for your grandchildren and future generations.
With financial independence, your family can live to their full potential. They won’t have to worry about making a basic living to keep a roof over their heads.
Conforming to societal norms is often not discussed as one of the benefits of owning a home. But there is a huge payoff to the satisfaction one feels about owning their own home.
Being a homeowner gives you the appearance of financial responsibility and places you a cut above your peers that are still renting. You also get a good credit rating and financial institutions look upon you favorably when you need credit.
Purchasing your own house might seem like a scary big step in life. However, there are many benefits of buying a home to take advantage of. There are also many financing options for people at all financial levels.
If you’re looking to buy a home but need some extra assistance navigating the process, contact us today for a free consultation.